Three years after the Occupy movement first directed long-overdue attention to the scourge of inequality in America, the gulf between rich and poor has gotten too big for even the Federal Reserve to ignore.
As Federal
Reserve Chair Janet Yellen recently pointed out, half of us now
own a mere 1 percent of America’s household wealth.
On average, the lower half of all U.S. households
command merely $11,000 in net worth — that’s what’s left when you subtract all
forms of debt from your home equity, savings, and other investments (if you’ve
got any).
Put another way, half of us possess next to nothing.
How about at the top? Families in the top 5 percent on average have $6.8 million to their name — nearly twice what they possessed a quarter of a century ago.
With a contrast that stark, it’s hard not to agree
with Yellen’s suggestion that the nation’s inequality could be downright
un-American.
“I think it is appropriate to ask,” she said at a
recent conference on economic opportunity and inequality at the Federal Reserve
Bank of Boston, “whether this trend is compatible with values rooted in our
nation’s history, among them the high value Americans have traditionally placed
on equality of opportunity.”
Income, while not quite as concentrated in the
pockets of the few as wealth, is also getting more skewed.
After correcting for inflation, the Fed found that
the income of the wealthiest 5 percent of households soared by 38 percent
between 1989 and 2013, while the income of the other 95 percent inched up by
less than 10 percent.
You might expect that communities of color are
suffering from more inequality than whites. You’d be right.
Demographers have documented a gaping racial wealth
divide. According to the Pew Research
Center, for example, black Americans are three times more likely
than whites to live in poverty, and Latinos are 2.6 times more likely. Typical
white and Asian-American households, meanwhile, have more than 11
times the net worth of median black and Latino households.
The numbers get even more ludicrous at the very top.
The top 0.1 percent of Americans now controls 22 percent of the nation’s
wealth, economists Emmanuel Saez
and Gabriel Zucman found. That’s just about the same share as the
bottom 90 percent.
Why should policymakers focus on inequality? One
answer is that by crimping consumption, inequality is a key factor behind the
failure of the U.S. economy to fully recover from the Great Recession.
That could explain why despite sunny forecasts and
sinking gas prices, the shopping
frenzy at brick and mortar stores that now starts on
Thanksgiving turned out to be a bit of a dud this year.
Lackluster holiday spending by the masses should
surprise no one. As Brendan V. Duke and Ike Lee lamented in a recent Center for
American Progress report:
“When households do not have money, retailers do not have customers.”
Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national
editorial service run by the Institute for Policy Studies. OtherWords columnist William A.
Collins is a former state representative and a former mayor of Norwalk,
Connecticut. OtherWords.org
